Islamic values could control bank greed


Daily Telegraph Thurs 4 November 2010Shadow treasurer Joe Hockey stuck his neck out last month when he challenged treasurer Wayne Swan to stand up to the banks. He put a strong set of reform proposals on the table and spruiked them in the media.

Hockey pointed out that Reserve Bank minutes showed the banks had overstated increases in funding costs. He said the government should be protecting home buyers and small businesses from the banks’ predatory practices. At the time, Hockey was portrayed as a fool by the government and the banks, and even his own party leader Tony Abbott appeared to distance himself.

Since then, we’ve had the surprise interest rate rise on Melbourne Cup Day, and the Commonwealth Bank’s decision to take from its customers nearly double the amount of the Reserve Bank increase. Now Hockey is being rightfully lauded, and the tabloid press has launched a campaign against the banks’ corporate greed. 

On Friday, the Daily Telegraph was pointing the finger at banks when it reported survey findings that ‘almost 300,000 Australians say they are too poor to celebrate Christmas this year, while another 1.8 million will postpone it’. The paper urged its readers to get online with its blogger Tony Abbott to work out how to ‘get the banks under control’.

One way of getting the banks under control could be to study Islamic banking, which repudiates the principle of charging interest. Instead, under Sharia banking, the bank might enter into a partnership with the home buyer or small business owner, in which they share the profits. 

Last year the Vatican’s semi-official newspaper L’Osservatore Romano urged Catholics to take a sympathetic look at Islamic banking: ‘The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service.’ 

Such thinking about banking shares common ground with the Grameen Bank, the microfinance entity that was founded in Bangladesh to make small loans to the poor that require self-discipline rather than collateral. 

Liberal Senator Cory Bernardi dismissed Islamic banking in comments he made last week, because ‘Sharia or Islamic law is incompatible with Australia's Western values’.

It could well be that he is right, and Islamic banking is indeed incompatible with Western values. But Western values that uphold a banking system that treats its customers with disdain – as the Commonwealth Bank did last week – need to be questioned. 

If Australians are not convinced that their banks are looking after them, a study of Sharia banking could lead us to adopt some of its values. This could prove to be as effective in eradicating corporate greed as changes in government regulation.

Michael MullinsMichael Mullins is editor of Eureka Street. He also teaches media ethics in the University of Sydney's Department of Media and Communications.

Topic tags: Michael Mullins, banking, interest, sharia, joe hockey, cory bernardi, sharia banking, islamic banking



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Existing comments

Read the papal encyclicals listed below for the Catholic response to usury.

Trent | 08 November 2010  

Wow! It's 10.30 a.m. and only Trent has commented on Michael Mullins' thought provoking article.

Have we Eureka Street readers got such a vested interest in the banking system that we don't know how we should be making use of the present brouhaha to agitate for reform?

In my own case I think today is a wonderful time to re-examine in the light of numerous papal encyclicals the whole capitalist system and the democratic systems of varying probity that allow the wealthy "to gouge exorbitant profits" (to use a tabloid press expression) from the less well off.

I can't see any Catholics in the present federal parliament delivering a speech along the lines of John Paul II's Laborem exercens.
Maybe Eureka Street could give them a nudge.

Uncle Pat | 08 November 2010  

Bank bashing is easy. No bank can survive if it treats its customers with "disdain". Everyone wants services as cheaply as possible and no one likes price increases. Banking involves
borrowing money from someone and lending to another. There are risks on both sides of this
transaction. Banks shield their customers from this risk taking on the cost of failure as well
as that of providing computer and branch services. These costs need to be covered otherwise we end up with bank failures.

Borrowing costs are not simply determined by the Reserve bank but politicians and the media are happy to say they are. By all means defend bank customers and consider alternatives but don't trivialise the banking process.

Peter Anderson | 08 November 2010  

It is now 4.45 pm. Only three comments on Michael Mullins' article on one possible method of eradicating corporate greed from the banking system.

Looks like I was right. We Australians are so hooked into a system that is biassed heavily in favour of holders of bank shares, who are prepared to see their CEOs paid gobsmacking salaries and performance rewards, that we can't even suggest that maybe there should be some discussion on what is a reasonable cap on mortgage interest rates.

Uncle Pat | 08 November 2010  

This sounds very like the Old Testament laws of Moses . As Muslims are people of the book "(The Bible up to the New Testament)" This is quite likely the source. The Bible is a plan of how to live.

michael ansted | 08 November 2010  

Its the same thing but with more control... You get rent-to own what was 1 dollar is now 10 dollars...Its just a new form dictators... On what is and is not... and the one who hold the gold rules...

ZorroIsGod | 09 November 2010  

The only real peaceful trading system is the Native American seashell currency... Anyone could create the currency but it had to be made right... The martial used seashells not gold... gold only leads to more holes in the ground...greed to control... nobody starved and everyone had things they could do. Seashell games where used by people for people to build things... So ask your self what is usury... A basket maker would trade for seashells currency… a currency maker would trade for seashell… kids would walk the shoreline for them.. Their were no monopoly on currency making by banks…

ZorroIsGod | 09 November 2010  

So ask your self what is usury...

Is sharia banking not usury...

because it sure looks that way to me Native American... One who dictates Rent-To Own where price can be any demand... usury... One who uses money as a weapon against others for control...

ZorroIsGod | 09 November 2010  

It seems to me that the reason there are so few comments is that people know very little about the suggested alternative and perhaps not that they are uninterested. A deeper exploration of Sharia banking is necessary here. I like the premise that the values behind Sharia banking may offer ideas for Western society's current stand-off with the banks. However, does it equate to a real difference? I have heard that what Sharia loans lack in interest they make up for in fees. I guess that like many others, I should do some further reading..

Ashlea | 09 November 2010  

Initiatives are over due here in our country, India to make use of the benefit of Islamic Finance in our efforts to alleviate poverty , development and growth of our economy with special emphasis on rural development and agriculture.

Pareethu Bava Khan | 09 November 2010  

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